Second profit warning sends shares in chip maker Wolfson into tailspin

Shares plunged 15 per cent in early trading to hit a 15-month low of 148p before an afternoon rally brought them back to close down 18.5p at 155p.

Wolfson - which makes chips for mobile phones, tablet PCs and hi-fi systems - trimmed its full-year revenue growth forecasts to under 10 per cent following a "sharp reduction" in the past three weeks in orders from its customers.

The cut follows a previous downgrade at the end of last month, which saw analysts lower their predictions from 30 per cent to 13 per cent.

Electronics companies - including Wolfson clients Samsung and Blackberry-maker Research in Motion (Rim) - are struggling in the face of stiff competition from the all-conquering Apple brand and as consumer spending dwindles.

In order to return to profitability in the fourth quarter, Wolfson yesterday unveiled $6 million (4m) of cost cutting, which will see its global workforce of 430 staff reduced by a "single-figure percentage".

Analysts at investment bank Espirito Santos said: "The second profit warning in a month clearly illustrates limited visibility and the challenges Wolfson is facing in translating design wins into revenue."

Following June's profit warning, Numis analyst Nick James raised the spectre of a possible takeover bid for Wolfson because it "lacks scale". But Wolfson yesterday again dismissed suggestions of a sale, saying the issues it faced were industry-wide.

News of the job losses came as Wolfson unveiled a 24 per cent year-on-year rise in sales in the six months to 3 July to $79.7m.

The jump in turnover - which comes on the back of a successful two years of "design-ins" - in which clients chose Wolfson's chips to go into their gadgets - helped to cut underlying operating losses to $3.9m from $6.1m.

But revenue growth has slowed in recent months, up just 7 per cent in the second quarter.

Contract wins in the first half included more work with existing customers LG and Samsung, as well as work with new clients such as tablet computer makers HP and Toshiba.

Ian Robertson, analyst at Seymour Pierce, said: "The statement gives the promise of excitement in 2012 with a new tier-one smartphone platform design, which management believes will make a material difference to the 2012 numbers - this is all that stops us moving to a 'sell'."

Other Wolfson-watchers did not hold back though, with Peel Hunt analyst Alex Jarvis cutting his rating from "hold" to "sell". Jarvis noted the sharp reduction in customer orders was consistent across the industry, with Applied Materials and Novellus reporting similar patterns.Richard Curr, head of dealing at Prime Markets, also issued a "sell" rating, adding: "Wolfson was one of the few stocks that genuinely defied the credit crunch, delivering a stellar performance and, up to February, a 500 per cent-plus return for shareholders. While the delays in product launches are frustrating, of greater concern is the rapid slowdown in revenue growth and the uncertain outlook."